The question of whether an advertisement has crossed the line into campaign activity is an
important one under the tax laws, particularly for tax-exempt 501(c) organizations. There are two
main reasons. First, 501(c)(3) charitable organizations (including churches and other houses of
worship) are prohibited under the Internal Revenue Code (IRC) from engaging in campaign
activity. They are, however, permitted to take policy positions and engage in an insubstantial
amount of lobbying.
Second, other types of 501(c)s—primarily 501(c)(4) social welfare organizations, 501(c)(5) labor
unions, and 501(c)(6) trade associations—may engage in campaign activity. However, it (along
with any other non-exempt purpose activity) cannot be their primary activity. This standard has
been the focus of congressional and public scrutiny, as 501(c) groups have reportedly spent
millions of dollars on campaign activity in the post-Citizens United era, and allegations have been
made that some should have their status revoked for engaging in too much campaign activity.
Whether an advertisement is campaign activity is key in this context because a “true” issue ad, as
defined for tax purposes, would not be counted as campaign activity when determining whether
revocation of 501(c) status is appropriate.

The standard for determining whether something is campaign activity under the IRC is whether it
exhibits a preference for or against a candidate. Clearly, ads that tell people who to vote for or
against are campaign intervention. However, in situations involving something short of express
advocacy, this standard does not lend itself to bright-line rules. Preference can be subtle, and the
IRS takes the position that it is not always necessary to expressly mention a candidate by name.
As a result, the line between issue advocacy and campaign activity can be difficult to discern.

The IRS has released two rulings that provide a non-exhaustive list of factors the agency
considers when determining whether an issue advocacy communication is electioneering. [Rev. Rul. 2004-6, 2004-1 C.B. 328; Rev. Rul. 2007-41, 2007-1 C.B. 1421.] The
most important point to keep in mind is that the determination of whether an ad is actually
campaign activity is entirely dependent on the facts and circumstances of each case. This requires
looking at the ad in question, as well as being familiar with some of the organization’s other
activities (e.g., has the group run a series of similar ads?) and the election (e.g., has the issue been
raised to distinguish among the candidates?).

Finally, the term “issue advocacy” is also used when people talk about campaign finance law and
policy. The terminology used in tax and campaign finance law and policy do not always match.
Thus, it should not be assumed that the characterization or treatment of an activity for campaign
finance purposes necessarily results in the same characterization or treatment for tax purposes,
and vice versa.